NAV and Dividend

Schroder Real Estate Investment Trust Limited (the 'Company' / 'Group') NAV AND DIVIDEND Net Asset Value Schroder Real Estate Investment Trust Limited announces an unaudited net asset value ('NAV') of £290.7 million or 56.1 pence per share ('pps') as at 31 December 2014. This reflects an increase of 1.8% per share compared with the NAV as at 30 September 2014, or a NAV total return, including the dividend of 0.62 pps, of 3%.The NAV total return over the 12 months to 31 December 2014 was 24.5%. A breakdown of the NAV movement over the quarter is set out below: £m pps Comments NAV as at 30 September 260.0 55.1 Announced 5 November 2014. 2014 Net placing proceeds 26.5 0.1 Placing proceeds of £27 million less costs. Adjusted NAV post placing 286.5 55.2 Based on 518,513,409 shares. Unrealised change in 5.9 1.1 Like-for-like uplift increase of 2.2% valuation of direct before capital expenditure and the property portfolio impact of transactions over the quarter. Capital expenditure and (1.1) (0.2) Acquisition costs relating to the acquisition costs Matalan in Bletchley and Heathfield Industrial Estate in Milton Keynes. Unrealised loss on joint (0.3) (0.1) Increase in the NAV of City Tower of £ ventures (City Tower in 1.4 million (included in the Manchester and University like-for-likemovement of 2.2% above) of Law in London) off-set by £1.7 million of acquisition costs relating to the University of Law Campus in Bloomsbury. Realised loss on (0.9) (0.2) Loss on disposal arises due to part of disposals the Stoke disposal proceeds (see transactions section below) being treated as an exceptional income item. Post-tax net revenue 3.7 0.7 Reflects quarterly dividend cover of 101% excluding exceptional items (principally relating to the Stoke surrender premium) and non-recurring items. Dividends paid (2.9) (0.6) Reflects an annualised dividend of 2.48 pps. Others (0.2) (-) Adjustment for lease incentives. NAV as at 31 December 290.7 56.1 2014 Strategy On 20 November 2014 the Company announced the issue of 47 million Ordinary Shares under its Placing Programme at a price of 57.5 pps, raising gross proceeds of £27 million. These proceeds have been invested in the University of Law Campus in London, described under Acquisitions below. During 2014 the Company raised total equity of £84.4 million from the issue of 162.6 million shares and deployed these proceeds, together with proceeds from lower yielding disposals, into nine acquisitions totalling £120 million at an average yield of 6.6%. These acquisitions satisfy the Company's investment policy by offering an above average yield, good fundamentals and greater scope for higher rental growth and value enhancing asset management. Successful implementation of the growth strategy is delivering the expected benefits to shareholders in terms of NAV growth, increased dividend cover, reduced leverage and improved economies of scale. The Placing Programme, established through the Company's prospectus dated 20 March 2014, and approved by shareholders in April 2014, enables the Company to issue up to a further 71 million new shares over the period to 19 March 2015 with such shares being issued at a premium to the prevailing NAV in order to cover the costs associated with the issue. The momentum in the UK property market is expected to continue in 2015 which should, in turn, lead to attractive returns for our shareholders. Whilst this should lead to opportunities to enhance shareholder returns through further growth, the potential for capital market volatility and political uncertainty during 2015 will require a continued disciplined approachto new investment. Against this backdrop, and the shift from an investor-led cycle to an occupier-led cycle, we will continue totarget stronger towns and cities that we expect to benefit disproportionally from higher GDP and jobs growth that should in turn lead to higher rental growth and total returns. These factors combined mean that whilst the Company is actively seeking potential acquisitions to be funded from existing cash, the remaining capacity to issue new shares may not be issued prior to 19 March. Dividend payment The Company announces an interim dividend of 0.62 pps for the period 1 October 2014 to 31 December 2014. Following the issuance of 47 million shares on 20 November 2014 the quarterly dividend payment increases from £2.9 million to £ 3.2 million. The dividend payment will be made on 27 February 2015 to shareholders on the register as at 6 February 2015. The ex-dividend date will be 5 February 2015. Over the quarter to 31December 2014 dividend cover was101% excluding exceptional items and non-recurring expenses. Market overview The latest Investment Property Databank (`IPD') Monthly Index confirmed an average total return for the three months to 31 December 2014 of4.4%, comprising an income return of 1.5% and capital growth of 2.9%. The retail sector produced the weakest total return of 2.8% with the industrial and office sectors producing total returns of 6% and 5.6% respectively. Performance versus IPD Index The latest available data for the quarter to 30 September 2014 showed that the Company's property portfolio produced a total return of 7.4% compared with4.4% for the IPD peer group Quarterly Version of Balanced Monthly Index Funds (the `IPD Index') on a like-for-like basis.This resulted in a total return for the 12 months to 30 September 2014 of 21.8% compared with the IPD Index of 17.9%. Property Portfolio As at 31 December 2014 the Company's direct property portfolio comprised 55properties independently valued at £396.45 million. At the same date, the portfolio produced a rent of £25 million per annum which, based on the independent valuation, reflected a net initial yield of 6%. The portfolio's rental value is £29 million per annum, resulting in a reversionary yield of 6.9%. The portfolio benefits from additional fixed rental uplifts of £1.2 million per annum due by December 2016. Theportfolio void ratewas unchanged over the quarter at 10.8%, calculated as a percentage of the portfolio rental value. The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, increased over the quarter from 7.25 to 7.5years. The tables below summarise the key portfolio information as at 31 December 2014: Sector weightings Weighting % SREIT IPD Index* Retail 29.5 40.4 Offices 42.8 30.7 Industrial 23.0 19.4 Other 4.7 9.5 * Latest available IPD Index data as at 30 September2014 Regional weightings Weighting % SREIT IPD Index* Central London 8.6 15.8 South East excl. Central London 35.1 43.2 Rest of South 10.1 6.7 Midlands and Wales 22.3 19.1 North and Scotland 23.9 15.2 * Latest available IPD Index data as at 30 September2014 Top ten properties Value (£) (%) 1 Manchester, City Tower 36,675,000 9.3 2 London, University of Law 34,000,000 8.6 Campus 3 Brighton, Victory House 29,250,000 7.4 4 Leeds, Headingley, The Arndale 18,300,000 4.6 Centre 5 Brentford, Reynards Business 18,000,000 4.5 Park 6 Uxbridge, 106 Oxford Road 18,000,000 4.5 7 Salisbury, Churchill Way West 15,400,000 3.9 8 Milton Keynes, Stacey Bushes 14,900,000 3.8 9 Norwich, Union Park 12,250,000 3.1 10 Basingstoke, Wickes unit 11,900,000 3.0 Total as at 31 December 2014 208,675,000 52.7 Top ten tenants Rent p.a. (£) % of portfolio 1 University of Law Limited 1,582,743 6.3 2 Wickes Building Supplies 1,092,250 4.4 Limited 3 Aviva Life and Pensions Ltd 1,039,191 4.2 4 The Buckinghamshire New 1,018,267 4.1 University 5 BUPA Insurance Services Limited 960,755 3.8 6 Mott MacDonald Limited 790,000 3.2 7 Recticel Limited (Guarantor 731,038 2.9 Recticel SA) 8 Lloyds TSB Bank PLC 710,000* 2.8 9 Matalan Retail Limited 675,800 2.7 10 Retail Limited 657,177 2.6 Total as at 31 December 2014 9,257,221 37.0 *Lloyds rent reflects the income post expiry of rent free in Liverpool During the quarter and since the quarter end the Company completed £49 million of acquisitions and £25.6 million of disposals which are summarised below: Acquisitions The University of Law Campus in Bloomsbury, London WC1 On 19 December 2014 a 50% interest in The University of Law Campus in Bloomsbury, London WC1 was purchased for £34 million. The property was acquired alongside another Schroder Real Estate fund for a total price of £68 million, reflecting a net initial yield of 4%. The property is let to The University of Law on a 12 year lease without tenantbreaks ata rent of £1.43 million per annum (50% share) or £33.43 per sq ft.The lease benefits from five yearly, upward only rent reviews to the higher of (i) the movement in the Retail Price Index (`RPI') subject to a minimum uplift of 1% per annum and a maximum uplift of 4% per annum; or (ii) the open market rental value without a maximum uplift. The freehold property comprises two parcels of land totalling 0.8 acres on which there are four buildings totalling 85,814 sq ft with a mix of office and D1 (educational) planning use. The property is located one block from Bedford Square and approximately 400 metres north of Tottenham Court Road station that is benefiting from infrastructural improvements, including the creation a major Central London Crossrail station. The current low site density and mix of uses in the surrounding area creates the potential for higher long-term alternative use value. Matalan, Bletchley, Milton Keynes On 18 November a retail warehouse in Bletchley, Milton Keynes was acquired for £9.9 million, reflecting a net initial yield of 6.5%. The property is let to Matalan Limited for a further 6.5 years at a rent of £675,800 per annum, equating to £13.14 per sq ft. The freehold property comprises a 51,488 sq ft, retail warehouse in a prominent position on the south side of Milton Keynes adjacent to the junction of Watling Street and the A5 dual carriageway. The property adjoins a Tesco superstore and is a short distance from complementary retail warehouse occupiers including IKEA and retail parks such as Beacon Retail Park, where rents are in the region of £20 per sq ft. The property has a flexible planning consent permitting all retail uses except for food and has a site density of 35% with potential for future intensification of use. Heathfield Industrial Estate, Milton Keynes On 25 November Heathfield Industrial Estate in Milton Keynes was acquired for £ 5.06 million, reflecting a net initial yield of 7.7% and a reversionary yield, assuming all units are let at current market rents, of approximately 9%. The 28 unit industrial estate totalling 104,200 sq ft immediately adjoins the 213,536 sq ft Stacey Bushes Industrial Estate in Milton Keynes that was acquired in August 2014. Disposals Wembley, Olympic Office Centre As expected, on 19 December the disposal of The Olympic Office Centre completed for £15.4 million, in line with the independent valuation as at 30 September 2014. Brentford, Reynards Trading Estate On 23 December 2014 planning permission was issued for a 195 unit residential scheme at Reynards Trading Estate in Brentford. The disposal to Notting Hill Home Ownership is therefore unconditional and due to complete on 11 February 2015 at a price of £20.18 million. The price compares with the independent valuation as at 31 December 2014 of £18 million. Stoke-on-Trent, Remploy Building On 22 November the Remploy Building in Stoke was sold for a total consideration of £3.5 million, reflecting a net initial yield of 8% and in line with the independent valuation as at 30 September 2014. The warehouse property was let to Remploy,who were not in occupation, for a further seven years. The Company proactively undertook a joint sale exercise with Remploy and completed a disposal to an owner occupier at £2.31 million, with Remploy simultaneously paying a surrender premium of £1.19 million. Harrow, St. Ann's Road On 22 December a retail unit in Harrow was sold for £2.14 million, reflecting a net initial yield of 5.75%, which was 7% above the independent valuation as at 30 September 2014. The property was let to Caversham Finance Limited, trading as Brighthouse, for a further 7.5 years. Debt The Company has a single loan in place with Canada Life totalling £129.6 million. As at 31December 2014 the loan was secured against property with a combined value of £293.6 million. The loan has a weighted duration of 12.25 years with a fixed interest rate of 4.77%. Details of the loan and compliance with the principal covenants are set out below: Canada Maturity Interest Loan to LTV Interest ICR Forward Forward Life rate (%) Value ratio cover ratio looking looking loan (`LTV') covenant ratio covenant ICR ICR ratio ratio* (%)* (%)** (%)** ratio covenant (%) (%)*** (%)*** 103.7 16/04/ 4.77 44.1 65 299 185 260 185 2028 25.9 16/04/ 2023 * Loan balance divided by property value as at 31 December 2014 ** For the quarter preceding the Interest Payment Date (`IPD'), ((rental income received - void rates, void service charge and void insurance) / interest paid) *** For the quarter following the IPD, ((rental income received - void rates, void service charge and void insurance) / interest paid) In addition to the property portfolio secured against the Canada Life facility, the Company has unsecured properties with a value of £102.9 million and cash as at 31 December 2014 of approximately £28 million. This results in a loan to value ratio, net of cash, of 25.6%. -ENDS- For further information: Schroder Real Estate Investment Management Limited 020 7658 6000 Duncan Owen / Nick Montgomery Northern Trust: 01481 745529 David Sauvarin FTI Consulting: 020 3727 1000 Dido Laurimore / Ellie Sweeney
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